It may not be comfortable, or populer, but given the ambiguous nature of what is and is not a combatant that the entire Warizistan district could reasonably be considered a belligerent party engaged in war against the United States, and it's interests in the Af/Pak area of operations.
Leaving aside any issues of Paki sovereignty over that part of FATA, there is no doubt that AQ-Taliban and associated groups (following the construct of the 2001 AUMF) constitute a "Power" to the armed conflict in the Wari agencies. Where those designated "hostile forces" have control of territory and populace, that territory and populace are belligerent to us - just as Germany and Japan were belligerent nations in WWII. However, as you also point out, they (the general populace) may be more an occupied population than active supporters of the hostile forces (so, are they Germany Proper, Occupied France or something in between ?).

No matter which scenario is fact, the Laws of War still require distinction between combatants and civilians (much more difficult where the combatants melt into the civilians); and consideration of proportionality in targeting (e.g., to eradicate a given group of combatants, how many civilians will be killed ?). Thus, the Wari agencies cannot be a free fire zone.

Through experience and observation I have come to the conclusion that relatives and neighbors of the various terrorist entities as their version Combat Support and Service and Support elements of the vast majority Mujahideen groups. This would make them legitimate military targets would it not?
I'd say that infrastructure - the informal "Combat Support and Service and Support elements" - should be considered combatants; but then I agreed with that aspect of the Phoenix program. To be candid, I think that is a minority position - at least legally.

I am curious about what the folks here think of that - not so much as a legal point (although it can be argued that way); but as a metter of military ethics and military practicality. How do you distinguish these infrastructure folks from the rest of the population - assuming that you can legally target them ? I suppose intelligence, intelligence & intelligence.

The various Gitmo and Bagram detainee cases could impact all of this. These cases are not that important in and of themselves. But, their rules as to the status of "captures" should be the same as for status allowing or not allowing "kills". So far, there seems a tendency to distinguish between armed combatants and unarmed supporters - and to consider the latter as being civilians (not subject to "kill rules"; and subject to detention only if guilty of a crime).